Whales Buy Bitcoin, What They May Know You Don’t
Bitcoin price took a big hit yesterday despite a positive surprise in the US Consumer Price Index (CPI), following a rumor that the US government sold 9,800 BTC related to Silk Road. Since then, the market has struggled to recover from the shock.
However, one group of investors shows no fear: whales. The big investors with a lot of money are considered one of the most reliable indicators of when it is a good time to buy Bitcoin. On-Chain analyst Axel Adler stated: “BTC accumulation and distribution – no changes. Big players continue to buy BTC from smaller players.”
The chart below shows that investors with more than 5000 BTC have bought large amounts (along with smaller investors <10 BTC) over the past 30 and 90 days, while all other cohorts have shed BTC.
What do Bitcoin Whales know?
Of course, one can only speculate as to what the Bitcoin whales know that others do not. But the fact is that Bitcoin saw an uptrend yesterday after the CPI release, until the fake news (manipulation?) that the US government was selling Bitcoin broke.
But yesterday’s CPI print may have significantly more implications than is apparent at first glance. For some time now, the market has bet on an early pivot from the US central bank (Fed). The market is currently betting on three interest rate cuts by the end of the year (3x 25 bps to 4.25-4.50%).
While the US banking crisis reinforces these efforts, whales may have been calling the Fed’s bluff for some time. As NewsBTC editorial director and technical analyst Tony Spilotro recently pointed out via Twitter, the Fed (and the masses) are relying on lagging indicators.
Remember: CPI is a lagging indicator. The stock market is a leading indicator.
— Tony “The Bull” (@tonythebullBTC) 10 May 2023
Charlie Bilello, market strategist at Creative Planning, emphasized on Twitter that the consumer price index in the US has fallen from a peak of 9.1% in June last year to 4.9% in April. According to the renowned analyst, the reason for this decline is lower inflation rates in heating oil, petrol, used cars, gas supply, medical treatment, clothing, new cars, food at home and electricity.
Inflation rates in transport, food and accommodation outside the home have increased since June last year, but declines in the other main components have offset these increases. The fact that the US core inflation index (excluding food/energy) remains at 5.5% year-over-year is primarily due to the shelter CPI (+8.1% year-over-year), according to Bilello:
Why did Shelter CPI continue to move higher while actual rent growth has been moving lower for some time? Shelter CPI is a lagging indicator that underestimated real housing inflation in 2021 and the first half of 2022.
As Biello added, after 25 consecutive increases (annualized), the shelter CPI showed its first decline in April, from 8.2% in March (the highest level since 1982) to 8.1% in April. If shelter inflation eventually peaks, it will have a big impact on the overall CPI, since shelter makes up more than a third of the index.
Is deflation coming quickly?
This perception is reverberation by Fundstrat’s head of research, Thomas Lee. In an interview, Lee said that inflation will fall faster than most people think, and that will make the Fed’s pause more comfortable for investors because it will lead to a soft landing.
For Lee, this is one of the main implications of yesterday’s April CPI report. Carl Quintanilla from Fundstrat added:
40% of the CPI curve (by weight) is in direct deflation. This is a huge development. Housing and food are not “depleting”, even though real-time measurements show this. It will add another 50% or so when they do.
For Bitcoin, a rapid drop in inflation rates and a soft landing as predicted by Lee could be extremely bullish. Whales may use this phase to accumulate while retail investors sell for fear of a looming recession with high inflation.
At press time, the Bitcoin price was trading at 27,550, back in the lower range.
Featured image from iStock, chart from TradingView.com
